British Pound Cross Pick 02.15.2011
Following up with the GBP/USD long recommendation from the previous day, I bought the pound-dollar following the close, and was able to get in at 1.6035. My position is well in-the-money as the pair advances to a fresh weekly high of 1.6170, and the exchange rate may continue to push higher over the next 24 hours of trading as we expect the Bank of England to strike a highly hawkish tone in its quarterly inflation report. However, the central bank may curb its outlook for future growth as economic activity unexpectedly contracts in the fourth quarter, and the GBP/USD could face increased volatility following the report as the central bank looks to retain its wait-and-see approach throughout the first-half of 2011. In turn, I will tighten my stop to cost ahead of the inflation report, but will maintain the target at the 23.6% Fibonacci retracement from the 2009 low to high around 1.6200 as the pair retraces the decline from earlier this month.
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